The Old Custom House, Inc. v. CCC PSC Owner, LLC, et al.

Opinion

JS -6 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT ? CENTRAL DISTRICT OF CALIFORNIA 10 THE OLD CUSTOM HOUSE, INC., Case No.: 2:25-cv-08814-SRM-E 12 Plaintiff, 13 ORDER GRANTING PLAINTIFF'S v. MOTION TO REMAND [19] CCC PSC OWNER, LLC, et al., 16 7 Defendants. 18 19 I. INTRODUCTION 20 Before the Court is Plaintiff The Old Custom House, Inc.’s (“Custom □□□□□□□ 21 Motion to Remand pursuant to 28 U.S.C. § 1447(c). Dkt. 19. Defendants CCC PSC 22 Owner, LLC (“CCC”) and CCC TRS, LLC (“Shore Cliff Hotel’) (collectively, 23 “Defendants”’) filed an Opposition to Plaintiff Custom House’s Motion to Remand, to 24 which Plaintiff Custom House filed a Reply. Dkts. 25, 27. 25 Il. BACKGROUND 76 This action stems from the lease and operation of a cliffside restaurant, the 27 Ventana Grill, at Pismo Beach, California. See Dkts. 1; 2 at 12-17. On July 1, 2012, 28 Plaintiff Custom House entered into a Lease Agreement (““Agreement’’) with

1 || Defendants’ predecessor-in-interest to operate the Ventana Grill, of which it has 2 || approximately twenty years remaining on Lease extensions. See Dkts. 2 at 12-18; 19-1 at 6; 19-5 at 2. According to Plaintiff Custom House’s allegations, Defendant CCC owns the Pismo Beach property on which the Shore Cliff Hotel and Restaurant 5 || Building are located. Dkt. 2 at 13. As alleged, Defendant Shore Cliff Hotel has 6 || operational authority over the Shore Cliff Hotel and Restaurant Building at which the 7\| Ventana Grill is located. See Dkts. 1 at 5-6; 2 at 13, 18. Thereafter, Defendants 8 || consulted geotechnical experts, who according to Defendants, “identified significant 9 || stability issues with respect to the bluffs,” and determined that the Ventana Grill is 10|| allegedly “unsafe for occupancy.” See Dkts. | at 2; 19-3. In July of 2025, Defendants allegedly demanded that Plaintiff Custom House immediately shut down operations 12 || due to the asserted dangerous conditions. See Dkts. 19-3; 19-5 at 2. On August 18, 13 || 2025, Defendants served a Ten-Day Notice to Perform Covenants or Quit as to Plaintiff Custom House’s Lease. See Dkts. 1 at 3; 19-2;19-5 at 3. 15 As aresult, on August 25, 2025, Plaintiff Custom House filed the operative Complaint in the Superior Court of the County of San Luis Obispo in Case No. 25CV- 17|| 0546 against Defendants seeking to prevent Defendants from evicting Plaintiff 18 || Custom House from the premises. See Dkts. 2 at 12-17; 19-5 at 2. In sum, Plaintiff Custom House claims that Defendants are essentially attempting to evict it based on a 20 || “manufactured” safety concern. See Dkts. 2 at 12-17; 19-1 at 6; 19-5 at 2. More specifically, Plaintiff brings claims against Defendants under California law for breach of contract (Count One), breach of the covenant of good faith and fair dealing 23 || (Count Two), and declaratory relief (Count Three). See Dkt. 2 at 12-17. Based on these allegations, Plaintiff requests special damages in an amount of $70,000 on the 25 || first two counts and preliminary injunctive relief on the third count, in addition to a 26 || declaration that the Lease Agreement at issue is valid and in full force and that Defendants lack a valid basis to terminate the Agreement or demand Plaintiff 28 || immediately cease operations at the Restaurant Building. See id.

l On September 16, 2025, Defendants removed this action from the Superior 2 || Court of California, County of San Luis Obispo, pursuant to 28 U.S.C. §§ 1332, 1441, and 1446. Dkt. 1. Defendants filed an answer and counterclaim on September 23, 4|| 2025. Dkts. 6, 7. On October 15, 2025, Plaintiff Custom House filed the instant 5 || Motion to Remand, which includes a request for costs, expenses, and attorney fees. 6|| Dkt. 19. The Court finds the matter appropriate for resolution without oral argument. 7\| See C.D. Cal. L.R. 7-15. For the reasons set forth below, Plaintiff Custom House’s 8 || Motion to Remand is due to be GRANTED. IN. LEGAL STANDARD 10 A. Jurisdiction 11 “Federal courts are courts of limited jurisdiction.” Gunn v. Minton, 568 U.S. 251, 256 (2013) (quoting Kokkonen vy. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 13 || (1994)). Civil actions may be removed from state court if a federal court has original 14|| Jurisdiction over the action. See Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 33 15 || (2002) (Under the plain terms of § 1441(a), in order properly to remove [an] action 16 pursuant to that provision .. . original subject-matter jurisdiction [must] lie [ ] in the 7 federal courts.”). If any doubt exists regarding the right to removal, a district court 12 should remand the action to state court. See Matheson v. Progressive Specialty Ins. Co., 19 319 F.3d 1089, 1090-91 (9th Cir. 2003) (citing Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992)); see also Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 20 2009) (“The strong presumption against removal jurisdiction means that... the court I resolves all ambiguity in favor of remand to state court.” (internal quotation marks and 22 citation omitted)). 23 Moreover, an action removed to federal court must be remanded “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction.” See 28 U.S.C. § 1447(c). Removal of state action may be based on either diversity or federal question jurisdiction. See City of Chicago v. Int’l Coll. of Surgeons, 522 U.S. 156, 163 (1997); Caterpillar Inc. v. Williams, 482 U.S. 386, 392 28 || (1987). Diversity jurisdiction is established where (1) all plaintiffs are of different

1 || citizenship than all defendants, and (2) the amount in controversy exceeds $75,000, 2 || exclusive of interest and costs. See 28 U.S.C. § 1332(a). The burden to establish grounds for federal jurisdiction rests on the removing party. See Guglielmino v. McKee Foods 4|| Corp., 506 F.3d 696, 699-701 (9th Cir. 2007) (discussing burdens of proof placed on 5 || removing defendant when plaintiffs motion to remand pursuant to § 1447(c) and state- 6 || court complaint specify damages below the jurisdictional requirement for federal 7 court).! B. Citizenship 9 For diversity jurisdiction purposes, a corporation is considered “a citizen of

10 every State ... by which it has been incorporated and of the State . . . where it has its

1 principal place of business.” See 28 U.S.C. § 1332(c)(1); Hertz Corp. v. Friend, 559

U.S. 77, 80-81 (2010) (recognizing a corporation’s principal place of business refers

3 to the corporation’s “nerve center,” which “will typically be found at a corporation’s 14 headquarters’’). In contrast, a limited lability company is a citizen of any state where a

15 member of the company is a citizen. See Johnson v. Columbia Props. Anchorage, LP, 6 437 F.3d 894, 899 (9th Cir. 2006) (explaining that analogous to “a partnership, an

7 LLC is a citizen of every state of which its owners/members are citizens”); see also

Ig Fadal Mach. Centers, LLC v. Mid-Atl. CNC, Inc., 464 F. App’x 672, 673 (9th Cir.

19 2012) (discussing that a limited liability corporation or LLC “is a citizen of all states

50 where its members are citizens” for purposes of diversity jurisdiction). 21 |} — 22 ' Of note, the Ninth Circuit has recognized that the case on which the Guglielmino 73 || decision was based was overruled by Standard Fire Ins. Co. v. Knowles, 568 U.S. 588 (2013), which in effect reverted to the preponderance of evidence standard in Class Action Fairness Act cases. See Rodriguez v. AT&T Mobility Servs. LLC, 728 F.3d 975, 75 || 981 (9th Cir. 2013). The Ninth Circuit, however, has declined to rule on whether the standard applies to non-CAFA cases. See Guglielmino, 506 F.3d at 699 n.3. Other courts in this District have concluded that the “best reading of the law” as applied to non- 27|| CAFA cases where the amount in controversy is disputed and the complaint alleges less than $75,000 in damages is that a defendant must show the amount exceeds the threshold by a preponderance of evidence. See, e.g., Amaratunge v. Honeywell □□□□□ Inc., No. CV 16-04023-RGK-JC, 2016 WL 4435078, at *2 (C.D. Cal. Aug. 16, 2016).

l C. Amount in Controversy 2 When evaluating whether diversity jurisdiction exists, the district court first 3 || considers whether it is “facially apparent” from the complaint that at least $75,000 is 4|| in controversy. See Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th 5 || Cir. 1997) (stating that removal “cannot be based simply upon conclusory allegations”). 6 || If the amount in controversy is not apparent from the complaint, the amount a defendant asserts in the notice of removal, in general, is accepted. See Jauregui v. Roadrunner Transp. Servs., Inc., 28 F.4th 989, 992 (9th Cir. 2022); see also Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 88-89 (2014) (“[Defendants do not need to 10|| prove to a legal certainty that the amount in controversy requirement has been met. Rather, defendants may simply allege or assert that the jurisdictional threshold has been 12 || met.’’). 13 However, if a plaintiff contests the amount in controversy, “both sides submit proof and the court decides, by a preponderance of the evidence, whether 15 || the amount in controversy requirement has been satisfied.” See Jauregui, 28 F.4th at 992 (quoting Dart Cherokee, 574 U.S. at 88). Under the preponderance of the evidence standard, to satisfy its burden a removing party may rely on “a chain of reasoning that 18|| includes assumptions” if “the reasoning and underlying assumptions are reasonable.” See id. at 993 (quoting LaCross v. Knight Transp. Inc., 775 F.3d 1200, 1201 (9th Cir. 2015)). Such assumptions may also be reasonable if based on the allegations of the complaint. See Arias v. Residence Inn by Marriott, 936 F.3d 920, 925 22 || (9th Cir. 2019). 23 To determine the types of evidence that satisfy the preponderance of the evidence 24 || evaluation, the Ninth Circuit has endorsed the Fifth Circuit’s approach. See Singer, 116 F.3d at 377. In addition to considering the facts presented in the removal petition, 26|| defendants can submit any ‘“summary-judgment-type evidence relevant to 27 || the amount in controversy at the time of removal.” See id. (quoting Allen v. R & H Oil 28 || & Gas Co., 63 F.3d 1326, 1335-36 (Sth Cir. 1995)).

IV. DISCUSSION 2 In the instant Motion, Plaintiff Custom House argues that remand is appropriate 3 || as Defendants have not met their burden to establish diversity jurisdiction. See Dkt. 19- 4|| | at 6-15. More specifically, Plaintiff Custom House asserts that Defendants incorrectly 5|| identify their limited liability companies based on where their respective member 6|| entities were formed and their principal place of business instead of identifying the citizenship of each of the members of the limited liability companies and thus have not 8 || established the existence of complete diversity of citizenship. See id. at 8-9. 9 In addition, Plaintiff Custom House contends that Defendants have failed to 10|| establish that the amount in controversy exceeds $75,000. See Dkt. 19-1 at 10. Rather, Plaintiff Custom House asserts Defendants have not provided evidence that 12|| unambiguously supports an amount in controversy that satisfies the jurisdictional 13 || threshold. See id. In particular, Plaintiff Custom House takes issue with Defendants’ 14]| inclusion of asserted “speculative” damages in the millions it may incur if required to leave the premises. See id. at 12-13. Instead, Plaintiff Custom House argues if it must 16|| vacate the property, then it will not have an obligation to pay the amount due under the 17|| Lease to Defendants and therefore no cost would accrue to either party should an 18 || injunction be entered as it would solely affect possession. See id. at 13. And if Plaintiff Custom House were to prevail on an injunction, then, it contends, operations would 20 || continue on the premises, and it would not have more than $75,000 in damages based on any absence of revenue. See id. In other words, Plaintiff Custom House posits that 22 || the focus of its action is the right of possession, not the value of the property. See id. at 23 || 12. Because of this, Plaintiff Custom House insists that the amount in controversy for 24 || this action is determined based on the amount of damages it alleges in its Complaint, 25 || and not the value of the real property. See id. 26 In their timely filed Notice of Removal, Defendants assert that this Court has 27 || subject matter jurisdiction over this action based on the complete diversity of citizenship 28 || between Plaintiff Custom House and Defendants and that the amount in controversy

1 || exceeds $75,000, exclusive of interest and costs. See Dkt. 1 at 4-10. As support for 2 || removal, Defendants allege Plaintiff Custom House is a citizen of the State of California 3 || as it is a corporation organized and existing in the State of California with its principal 4|| place of business in the State of California. See id. at 5. Defendants assert that Defendant 5|| CCC is “a limited liability company wholly owned by its sole member CCC MRT Holdings, LLC.” See id. at 5. According to Defendants, MRT is “organized in the State 7\| of Delaware with its principal place of business in the State of Colorado.” Thus, for 8 || purposes of diversity jurisdiction, Defendants assert that Defendant CCC “is a citizen 9|| of the States of Delaware and Colorado.” See id. As to Defendant Shore Cliff Hotel, 10|| Defendants contend it is a “limited liability company wholly owned by its sole member CCC TRS Holdings, LLC.” See id. at 6. Defendants allege that CCC TRS Holdings is a “limited liability company duly organized in the State of Delaware with its principal 13 || place of business in the State of Colorado” and its corporate headquarters “located in the State of Colorado.” See id. Defendants, therefore, assert that “for purposes of diversity jurisdiction, Shore Cliff [Hotel] is a citizen of the States of Delaware and 16|| Colorado.” See id. 17 Upon review, Defendants’ allegations as to the citizenship of its limited liability 18 || companies identify members who are also limited liability companies. See id. at 5-6; Dkt. 2 at 3. Thus, Defendants must allege the citizenship of each sub-member of each 20|| member that is a limited liability company. See G & L 436 Bedford, LLC vy. Vonschlobohm, No. CV 22-06034-MWE-AFM, 2022 WL 16708448, at *2 (C.D. Cal. Nov. 4, 2022) (citing V&M Star, LP v. Centimark Corp., 596 F.3d 354, 356 (6th Cir. 23 || 2010)). 24 While the declaration of Defendants’ Vice President submitted in support of 25 || removal states that the limited liability companies’ “operations are directed, controlled, 26|| and coordinated by its high-level officers,” Defendants have not provided for the citizenship of each sub-member of each member alleged to be a limited liability 28 || company. See Dkts. 1 at 5-6; 2 at 3. Accordingly, Defendants have not met their burden

1 || to demonstrate diversity of citizenship. See G & L 436 Bedford, LLC, 2022 WL 16708448, at *2. 3 Even had Defendants established the citizenship of each of Defendants’ 4|| members, Defendants have not met their burden to show the damages and attorneys’ 5|| fees at controversy exceed $75,000. See, e.g., Singer, 116 F.3d at 377. In their 6|| Opposition, Defendants claim that in addition to the $70,000 Plaintiff Custom House alleges in the Complaint as damages, the attorneys’ fees sought under the lease clause 8 || and declaratory and injunctive relief for an oceanfront restaurant that generates more 9 || than $6 million in annual gross revenue “overwhelms the jurisdictional floor.” Dkt. 25 at 6. 11 At the time of removal, Defendants based their calculation of damages regarding Plaintiff Custom House’s declaratory relief cause of action, for example, on 13 || Plaintiff Custom House’s gross revenue from the Ventana Grill’s respective 14|| operations in 2023 of $6,569,990.63 and in 2024 of $6,481,231.98. See Dkts. 1 at 9; 2 at 3, 52-54. In addition, Defendants contend that the amount in controversy exceeds 16 || $75,000 based on “the potential cost to Defendants” if forced to comply with an injunction from terminating the lease agreement and a declaration that the Agreement 18 || 1s valid, for which Defendants would “potentially incur millions of dollars of damages.” Dkt. | at 10. Defendants further argue that the “large amount of attorneys’ 20 || fees” awarded in these types of actions in addition to the amount of Plaintiff Custom House’s alleged damages of $70,000, and the “multi-million dollar value of □□□□□□□□□□□ requested injunctive and declaratory relief’ exceed the jurisdictional threshold. See id. 23 || In support, Defendants cite a United States District Court for the Northern District of 24 || California and State of California cases involving lease agreements where fee awards 25 || for prevailing parties were more than the $75,000 amount in controversy requirement. 26 || See id. at 8-9. Defendants also direct the Court to Section 29 of the Lease Agreement dated July 1, 2012, which provides for the prevailing party in any action that arises out 28 || of the Agreement to recover reasonable attorney’s fees and costs. See Dkts. 1 at 8; 2 at

1}| 2, 18, 32. 2 In turn, Plaintiff Custom House maintains that its Complaint alleges damages 3 || below the jurisdictional threshold and contends that Defendants’ calculations are 4|| speculative as to an “outcome of a hypothetical catastrophic event” and include 5 || damages amount that venture beyond the issue central to its Complaint. See Dkt. 19-1. 6 Foremost, it is the amount of damages sought in Plaintiff Custom House’s Complaint, not the value of the real property, that determines the amount in 8 || controversy. See Lidner v. Wallace, No. 2:15-cv-03122-CAS-SS, 2015 WL 12655693, 9}| at *2 (C.D. Cal. June 10, 2015) (citing Cal. Equity Mgmt. Grp., Inc. v. Jiminez, No. 13-cv-1222 JSC, 2013 WL 1748051, at *1 (N.D. Cal. Apr. 23, 2013)); see also Litton Loan Serv., L.P. v. Villegas, No. C 10-05478 PJH, 2011 WL 204322, at *2 (N.D. Cal. Jan. 21, 2011) (‘[T]he amount of damages sought in the [unlawful detainer] 13 || complaint, not the value of the subject real property, determines the amount in controversy.’”’). 15 Here, Plaintiff Custom House seeks damages less than $75,000, as stated on the face of its Complaint. See Dkt. 2 at 15. Because Plaintiff Custom House’s cause of action is based on its alleged right to possession of the premises, damages are limited 18 || to those incident to possession of the property; which here, concern the Restaurant Building that houses the Ventana Grill. See, e.g., Lidner, 2015 WL 12655693, at *2. 20 || Further, the amount in controversy is not reached through intangible and speculative claims. See, e.g., Matheson, 319 F.3d at 1090-91; Jackson v. Am. Bar Ass’n, 538 F.2d 22 || 829, 831 (9th Cir. 1976). 23 As regards inclusion of attorneys’ fees to meet the amount in controversy, such 24 || fees may be included in the calculation “if authorized by statute or contract.” See 25 || Kroske v. U.S. Bank Corp., 432 F.3d 976, 980 (9th Cir. 2005) (citation omitted); see 26 || also Fritsch v. Swift Transp. Co., 899 F.3d 785, 794-96 (9th Cir. 2018) (remanding for 27 || district court to determine whether removing party met burden to prove the amount in 28 || controversy, including future attorneys’ fees with certain limitations, exceeded the

1 || jurisdictional threshold). 2 While Plaintiff Custom House’s Complaint does seek reasonable attorneys’ fees 3 || and alleges causes of actions based on claims of the breach of the Lease Agreement, 4|| neither are specific to an amount, nor alleged under a statute providing for such an 5 || award; nor do Defendants provide for an amount of attorneys’ fees specific to this 6 || action to meet its burden and break through the jurisdictional barrier to this Court. See 7\| Dkts. 1; 2 at 14-16. 8 Accordingly, Defendants have not met their burden to establish the requisite 9 || amount in controversy to show the requirements for diversity jurisdiction exist. Thus, this Court lacks subject matter jurisdiction over this case and this Court must remand 11 || this action to the state court. See Polo v. Innoventions Int’l, LLC, 833 F.3d 1193, 1196 (9th Cir. 2016); see also Bruns v. Nat’l Credit Union Admin., 122 F.3d 1251, 1258 13 || (9th Cir. 1997) (“Upon determining that it lacked subject matter jurisdiction, the district court was required to remand [plaintiff's] claims . . . to the state court.”’). 15 Regarding Plaintiff Custom House’s request for costs and attorneys’ fees based 16|| on Defendants’ removal of this case not being objectively reasonable, the Court deems the request as due to be granted. See Martin v. Franklin Cap. Corp., 546 U.S. 132, 141 18 || (2005) (‘Absent unusual circumstances, courts may award attorney’s fees under § 19|| 1447(c) only where the removing party lacked an objectively reasonable basis for 0 seeking removal.”). “[R]emovalis not objectively unreasonable solely because the removing party’s arguments lack merit.” Lussier v. Dollar Tree Stores, Inc., 518 F.3d 1062, 1065 (9th Cir. 2008). To determine if an objectively reasonable basis exists

53 for seeking removal, a court considers whether “at the time the notice of removal was filed” the basis was “clearly foreclosed.” See id. at 1066. In support of its request for attorneys’ fees, Plaintiff Custom House contends removal of this action to this Court 29 “was a Clear tactical move to increase the burden of this litigation.” See Dkt. 19-1 at 14- 26 15. Based on review of the state court Complaint and Defendants’ Notice of Removal, at the time of removal, Defendants failed to disclose complete jurisdictional facts 28 regarding the citizenship of all of its members and attempted to invoke jurisdiction

1 || based on possible losses to meet the amount in controversy, which was not supported 2|| by Plaintiff Custom House’s allegations in its state court Complaint. See Dkts. 1, 2. 3 || Upon review, this Court concludes that Defendants lacked a reasonable basis to remove 4|| the case. See Martin, 546 U.S. at 141; Harris v. Bankers Life & Cas. Co., 425 F.3d 689, 5 || 694 (9th Cir. 2005). 6 In the declaration, Plaintiff Custom House’s counsel of record, Shae Luchtta, 7 || States that seven hours were spent researching and drafting the instant Motion, and 8 counsel’s hourly rate is $400. See Dkt. 19-4 at 2. As stated in the declaration, counsel 9 has been practicing law in San Luis Obispo County for more than thirty-years and is a 10 principal at Luchetta Law PC, and counsel’s hourly rate is customarily charged in the i || area for the same or similar services by an attorney with counsel’s experience, D reputation, and ability. See id. at 1-2. The Court therefore awards Plaintiff Custom B House attorneys’ fees in the amount of $2,800. 14 Vv. CONCLUSION 15 Upon consideration of the above, the Court GRANTS Plaintiff's Motion to 16 Remand. Dkt. 19. This action is REMANDED to the Superior Court of the County of 7 San Luis Obispo in Case No. 25CV-0546. The Clerk is DIRECTED to CLOSE this Case: 19 0 IT IS SO ORDERED.

07 DATED: April 24, 2026 HON. SERENA R. MURILLO 23 UNITED STATES DISTRICT JUDGE 24 25 26 27 28